The World Economic Forum has led the creation of an industry consortium focused on improving the cyber security of financial technology companies, as a collaboration between fintechs and financial institutions grows.
The consortium’s founding members include Citigroup, online lender Kabbage, the Depository Trust & Clearing, Zurich Insurance Group and Hewlett Packard Enterprise, the companies said on Tuesday.
The group will create a framework to assess the security level of fintech companies and data aggregators, whose preparedness against hacks is seen as increasingly important to the stability of the wider financial industry, the companies said.
The financial services sector is among the most vulnerable to cybercrime because of the vast amount of money and valuable data that banks and investment firms process each day.
Over the past few years, banks and other finance firms have been strengthening their ties with young tech-savvy startups which are aiming to revamp the way financial services are created and consumed. The growth in collaboration is occurring either voluntarily, with banks looking to remain competitive, or due to new regulation such as the European Union’s revised Payment Services Directive.
This has heightened the need for fintech companies to implement sturdy cybersecurity measures, said Matthew Blake, head of the Financial and Monetary System Initiative at the WEF.
“Many partnerships are forming between financial technology companies and incumbent institutions,” Blake said in an interview. “Through those linkages, there is a potential introduction of risk.”
The need for better cybersecurity assessment mechanisms was identified in a WEF report published on Tuesday as one of the solutions to the security challenges posed by the increased use of digital services in finance.
The report noted that the use of technology innovations such as robotics and biometrics was expanding the amount of customer data at risk.
“While we are excited by the innovation of fintech, it also creates risks that I think need to be identified and worked on to establish standards,” Michael Bodson, president and CEO of DTCC, said in an interview.
The new consortium, which will be managed by the WEF and work with the organization’s new Geneva-based Global Center of Cybersecurity, will develop a point-based scoring system for fintech firms.